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Second Circuit throws out tobacco class action

Last Friday, the Second Circuit Court of Appeals threw out a class action against tobacco manufacturers in Simon II Litigation, No. 03-7140 (PDF), and ruled that Eastern District Judge Jack Weinstein had exceeded the scope of federal rules in certifying the class of smokers. (Weinstein, of Agent Orange fame, is notorious for his aggressive use of the class action procedure and consumer protection laws to resolve toxic tort and products liability actions -- see, e.g., Ted's post on overlawyered last Apr. 13 (gun lawsuits), Walter's on Oct. 23 (tobacco-health insurers). Weinstein now has control of the multi-district litigation against Eli Lilly over the anti-psychotic drug Zyprexa.)

The facts underlying the case are well-summarized in an article in today's New York Law Journal (via law.com):

A unanimous panel of the 2nd U.S. Circuit Court of Appeals said that Eastern District Judge Jack B. Weinstein had stretched the boundaries of the law by certifying a non-opt-out class of current and former smokers who had been diagnosed with smoking-related diseases.

The class was the first-ever nationwide group of plaintiffs certified against the tobacco industry. . . .

It was also the first time plaintiffs in a class action had sought only punitive damages, deciding to seek compensatory damages at a later date. The 2nd Circuit objected to that approach.

The intention of the suit was to mete out punishment against the tobacco industry in one blow for claims that it had suppressed and misrepresented information about the dangers of smoking dating back to 1953.

Rather than having individual plaintiffs winning and losing disparate verdicts against the industry, the nationwide, non-opt-out suit would, in theory, award punitive damages from a fund based on the severity of a plaintiff's injuries.

Judge Weinstein said he would apply New York state law to the claims and would exclude plaintiffs who had already won or settled claims against the tobacco industry.

The Second Circuit determined that the non-opt-out nature of the suit was not warranted under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure, since the plaintiffs lacked "evidence indicating either the upper limit or the insufficiency of the posited fund . . . [to] demonstrate that individual plaintiffs would be prejudiced if left to pursue separate actions without having their interests represented in this suit . . . ." (see Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)).

Also, the court of appeals questioned whether the unique nature of the suit -- determining punitive damages without first determining compensatory damages -- was permissible in light of the U.S. Supreme Court's decision in State Farm v. Campbell (see my discussion last June 15): "In certifying a class that seeks an assessment of punitive damages prior to an actual determination and award of compensatory damages, the district court's Certification Order would fail to ensure that a jury will be able to assess an award that, in the first instance, will bear a sufficient nexus to the actual and potential harm to the plaintiff class, and that will be reasonable and proportionate to those harms."



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.